Millicom International Cellular S.A.

Hello, everyone, and welcome to our second quarter 2024 results call. This event is being recorded. Our speakers today will be our CEO, Marcelo Benitez, our COO, Maxime Lombardini, and our CFO, Bart Van Haren. The slides for today's presentation are available on our website, along with the earnings release and our financial statements. Now, please turn to slide two for the safe harbor disclosure. We will be making forward-looking statements which involve risks and uncertainties, and these could have a material impact on our results. On slide 3, we defined the non-IFRS metrics that we will be referencing today throughout the presentation, and you can find reconciliation tables in the back of our earnings release as well as on our website. With those disclaimers out of the way, let me turn the call over to our CEO, Marcelo Benitez. Marcelo?

Thanks, Michelle. And hello, everyone. Thanks for joining us to discuss the company's performance during the second quarter. This has been an outstanding quarter for us at Millicom. And before we begin, I want to express my heartfelt thanks to all the members of the Tigo team. We have strengthened Tigo's market leadership and successfully implemented a more efficient platform to ensure the company's profitable growth for the years to come. Once again, a huge thank you. Now please turn to slide five for the highlights of the second quarter. The key highlight this quarter is our equity free cash flow, which reached 268 million, and consistent with our current capital allocation priorities, we use this cash flow to reduce our net debt. So our leverage ended the quarter at 2.7 times, thanks also to the organic EBITDA growth of almost 20%, which is coming from continued growth in mobile and B2B business and from the very significant efficiencies that we have unlocked over the past year. During this quarter, we've also made significant progress on several strategic projects that have the potential to greatly improve EFCF and return on capital across the group for the years to come. Bart will give you an update on some of these projects toward the end of today's presentation. Now let's review each of these highlights in more detail, beginning with our mobile business on next slide. For a second consecutive quarter, mobile service revenue grew 5% in Q2. This is just an acceleration compared to growth of just over 2% that we experienced during 2023. And there are four key drivers behind our stronger mobile growth this year. First, our network. We have invested in all our operations to enhance our mobile network capacity to support the growing demand of mobile data. This has enabled us to increase our pool through carefully planned price increases, beginning with prepaid. Second, postpaid. We have continued to actively migrate our best prepaid customers to postpaid. This explains about half of our postpaid net ads, which have been consistently strong over the past year. As you can see on the chart on the left. Third, convergence. We continue to promote our convergence offerings, and this drives lower churn, higher ARPU, and better customer lifetime value. Fourth and finally, improved market dynamics in Panama and Guatemala. As many of you know, the telecom sector requires ongoing investments to keep up with the growing demands of full consumers. This ongoing need makes it challenging for small players to remain competitive over time and has contributed to a global trend of consolidation into two or three leading players. Fully in line with this trend, you have seen on recent announcements in Colombia and Costa Rica. Please turn the next slide to look at our home business. As most of you know, over the past year, we have prioritized profitability and cash flow over growth in this business. We have continued to charge installation fees, driving quality for gross ads. We have implemented price increases across all markets, and we have begun a more return focus on our network expansion. These initiatives have led to strong ARPU improvement. And as you can see, the benefit to EBITDA and cash flow is very clear, especially in Colombia. Now we're ready to move from a defensive mode to an offensive strategy. With very significant upgrades on our HFC networks, offer simplification and increased commercial aggressiveness in low penetrating nodes, and we have strengthened our distribution and strong push on FMC. All of these initiatives combined have had an immediate beneficial impact on customer experience and have allowed us to reduce churn by 60 basis points. And we are starting to see our net ads back in positive territory in Q2, as you can see in the chart on the right. We expect this improving trend to continue in the second half of this year. And if we can deliver on this, our home business should be in a position to grow service revenue again in 2025. Please turn to the next slide to look at B2B, which had another solid quarter. B2B service revenue grew almost 6% organically this quarter. Over the last 12 months, our B2B business generated $970 million in service revenue. A big part of this growth is coming from digital solutions that grew 30% in Q2 and is now a quarter of a million dollar business. The two large Panama projects have contributed meaningfully to our growth on the past year, and this will create a tougher comparison for us as we get to Q4. But we continue to see solid underlying trends, and we hope to win more of these kind of large projects in the future. Our solid B2B performance is also coming from continued growth in SME client segment, especially in mobile. Now let's review our performance in our three largest countries, beginning with Colombia on next slide. The key highlight in Colombia this quarter is EBITDA margin at 39.5%. This is a new record for us in Colombia. There are three key drivers to our improved margins in Colombia. First, as you know, we have taken a lot of cost out of our business over the past year. Second, and as I mentioned earlier, we also make commercial decisions that have significantly improved the profitability and cash flow profile of our home business. And Colombia is our largest market for home services. And third, we continue to grow and gain scale in our mobile business. And this incremental revenue growth comes with very high margins, especially because most of the growth is coming from ARPU increase. Let's take a quick look at our Q2 performance in Guatemala on the next slide. As you'll recall, our Guatemala business faces some intense competitive pressure over the past two years, and competition remains very intense in the market. That said, we have seen a bit more stability since the second half of last year. Let's not forget that we had two successful spectrum auctions last year. As a result, we now have spectrum parity, which has fostered a return to a more rational competitive environment. We saw signs of this beginning of Q1, and this improving trend continuing in Q2, with service revenue accelerating to 3% from 2% in Q1. And the savings from our efficiency programs have allowed us to translate low single-digit revenue growth into high single-digit EBITDA growth. Now let's take a look at Panama on the next slide. The key highlight this quarter is our mobile service revenue growth, which accelerated to 14%. This is the fastest growth we've seen since the post-pandemic boom we've experienced when mobility restrictions were lifted. A big driver of this acceleration in Q2 was the consolidation of the market from three to two players, which contributed to our mobile customer growth this quarter. On the right, you can see how the combination of mobile growth and cost and capex savings from efficiency programs have translated in a sharp increase in quarterly OCF since the beginning of the year. Panama, with its stable and dollarized economy, is securing its position as the second largest contributor to Millicom's equity-free cash flow. Now let me turn the call over to Maxime to say a few words about our efficiency programs and the impact this has had on cash flow and leverage on this quarter.

Thank you, Marcelo. First, I want to congratulate you on your appointment as CEO. The company is in good hands and it's a pleasure working with you and the team to the end of this year and to support you beginning in January from my role on the board. Now onto efficiencies. As you know, it has been the rear that I focused on immediately when I joined as CEO less than a year ago. Contract Everest was underway, but there was opportunity to go well beyond the initial scope. Specifically, we focused on six key areas of opportunity as we prepared the budget for 2024. You can see these listed on the chart. We took action and implemented most of this during Q4 2023. And this is why we have been able to deliver such strong financial performance in the first half of this year. Let me give you a few examples. We reduced by 24% the cost of centralized functions that generated no revenue. We reduced headcount by more than 20% year-on-year, with reductions of between 15% and 30% in most geographies. As a result, total employee costs are down 15% organically, excluding structuring costs. And we are not replacing employees with consultants. The contrary, we have also reduced spending on external services by more than 15%. Then we reviewed every programming and content agreement and every software license that we added. And we found opportunities to switch to lower cost and in-house solutions or to drop some vendors completely. we successfully renegotiated many contracts. Overall, we have reduced our spending on programming by almost 20% and IT spend by more than 10%. And finally, you have seen that our capex has declined meaningfully. Most of this decline is the result of our focus on efficiency. Payback is now the key word when challenging capex. The CAPEX strategy is also supporting an ambitious network quality improvement. As Marcelo explained a few minutes ago, we have invested to increase speed on our HFC network. The same for mobile, where we pay attention to network quality. This provides a strong customer satisfaction, which translates in churn improvement. As a result of this efficiency focus during the last quarters, Millicom is becoming a more efficient company, both in terms of process and economics. We are doing more, faster, with less OPEX and CAPEX, and we are generating cash. It's a new DNA for the company. As you can see on the next slide, this has translated into very strong improvement in equity free cash flow in the second quarter of this year compared to last year. This combination of strong EBITDA growth and cash flow generation is bringing the leverage down very quickly, as you can see on the chart on the right. And while we are very pleased with these results, I can tell you there is still more that can be done, and we are already taking steps to ensure that the company can continue to sustain and grow its cash flow well beyond this year. Now let me turn the call over to Bart to review the financials for the quarter.